By Laurence Frost and Gilles Guillaume
PARIS, June 28 PSA Peugeot Citroen
unions voiced concern on Friday over a deeper tie-up plan with
General Motors that sources say the French carmaker is
seeking to revive.
Such a move would require major capacity cuts and face
serious obstacles, analysts also said - but the discussions may
signal that the companies are preparing to tackle overcapacity.
The Paris-based carmaker and founding Peugeot family have
repeatedly declined to comment on a Reuters report that the
founding shareholder is ready to hand over control in return for
a new cash injection from GM.
"A dilution of the family would not be good news," a
spokesman for Peugeot's moderate CFTC union said.
"One of the last remaining family groups would cease to
exist in its current form," he said. "It's the family attachment
to the company that has preserved its French roots so far."
GM reiterated it had no current plans to invest more cash in
Peugeot. The French carmaker also inconclusively explored a deal
with Chinese partner Dongfeng Motor Group, sources
"There's absolutely no question of selling the Peugeot
family's stake," a source close to the Peugeots was quoted as
saying by the website of France's BFM radio - without addressing
a possible capital increase or dilution of their existing
Under the terms of their alliance, which saw GM take a 7
percent Peugeot stake in a 1 billion euro ($1.3 billion) share
issue last year, the companies already plan to pool future
But they have so far avoided tough decisions on combining
production to generate far greater potential savings.
Opel, GM's German subsidiary, vigorously denied media
reports this week that its next Zafira minivan would be a
rebadged version of the Citroen C4 Picasso.
Because of their excess capacity - with Peugeot's French
factories running at 71 percent and Opel's German plants at 66
percent of maximum output - the tie-up would require politically
unpalatable closures and firings.
Such questions would resurface immediately with any deeper
combination of their European operations, analysts predicted.
Peugeot shares, which had advanced 5.5 percent on Thursday
after the Reuters report was published, gave up some of their
gains on Friday and were down 2.3 percent at 1458 GMT. GM was
0.3 percent lower in New York.
A tie-up that reduced capacity to current demand levels
would eliminate 8,000-10,000 jobs at Peugeot and almost 4,000 at
Opel, Metzler Bank analyst Juergen Pieper said, adding that
actual cuts would likely stop far short of that.
A GM investment is unlikely to make the French government
any more amenable to Peugeot restructuring, said Marc-Rene Tonn
of M.M. Warburg. "Why would the state be any more likely to
accept staff cuts under GM than under the Peugeot family?"
Opel employs 20,000 workers in Germany to Peugeot's
77,000-strong workforce in France. Officials for both
governments declined to comment.
"An eventual dilution of the Peugeot family seems hard to
avoid," Paris brokerage Aurel BGC said in a note.
"But deepening the agreement with GM would likely require a
guarantee that (more) plant closures and job cuts could be
carried out in France."
Morgan Stanley analyst Adam Jonas nevertheless noted "key
changes at Opel in the past nine months that may make a deeper
collaboration with PSA more realistic".
He cited closures already planned or underway at Peugeot's
Aulnay site near Paris and Opel's Bochum plant in Germany, and
new management of the GM brand under Volkswagen veteran
With their alliance now in its second year, "the two
companies should be getting increasingly familiar with each
other's systems and processes", Jonas added.
Peugeot clearly needs outside cash because the family has
other investment priorities, said Xavier Lelasseux, a spokesman
for the carmaker's centre-left CFDT union.
"If it comes from a new shareholder or GM that's no bad
thing," he said. "The danger is that it would be used to buy up
the strongest parts of the group to create savings for Opel,
with a huge impact on jobs."
Even the hard-left CGT union said it would be open to a GM
investment - while also giving a taste of how quickly that could
change with further job cuts.
"It doesn't bother us as workers whether our bosses are
French or American," said Jean-Pierre Mercier, who led the
union's unsuccessful fight against the Aulnay closure.
Recent experience shows that "having French bosses doesn't
protect our jobs", Mercier said. "Our real adversaries are the